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Instituto Tecnológico de Santo Domingo

Economist considers US $ 28,000 billion of economy's income to be at risk from COVID-19

The economist Rafael Espinal suggested lowering the salary of public employees who earn more than 100 thousand pesos, to also contribute to the decrease in state expenses that is bulky for the health and social programs.

SANTO DOMINGO. -The economist and research professor of the Instituto Tecnológico de Santo Domingo (INTEC), Pavel Isa Contreras, considered that a significant portion of the $ 28,000 billion current revenue that the Dominican economy receives annually, a third of its gross domestic product (GDP), are in risk from the COVID-19 pandemic.
“The main mechanisms and transmission channels through which the Dominican economy is linked to international trade are national exports (US $ 4,400 billion), for 17% of current income; free zones (US $ 5,700 billion) of gross exports, 23% of balance of payments income; approximately US $ 8,500 million in services, of which US $ 7,500 come from tourism, for 33% of current income; and remittances US $ 6,400 billion, 25% of income, "said the economist. I mean
Isa Contreras specified that the international context in which the COVID-19 pandemic appeared was bad for the economies. “It grabs the world economies at a delicate moment, not of increases but of losses. The effect that the pandemic will have on the economy is still very uncertain, the data is still very incipient, the scenario is very negative but the resignation of the damage is still uncertain. "
During the webinar "Economic implications of the Coronavirus COVID-19 in the Dominican Republic"Organized by INTEC, Isa Contreras pondered that clearly the greatest impact will be in economies more dependent on trade, tourism and services, compared to economies that are inserted in international trade through production and placement in goods markets.
On his side, Rafael Espinal, coordinator of the University's School of Economics, pointed out that the situation is a sacrifice for everyone, currently private employees are suspended while public employees are not, which is why the Dominican Government has to consider decrease in wages to public employees with salaries greater than 100,000 to 200,000 pesos and on a scale of proportional cuts, successively.
"The Government does not have the capacity to maintain a social assistance program and keep the public payroll intact. There are employees who have a certain level of salary that could be cut temporarily to make public spending more flexible. In those workers who earn salaries greater than 200,000 pesos, make proportional cuts such as income tax, to help reduce the expenses of the State that is bulky for the health and social programs, "said Espinal.
In addition, he highlighted as challenges for the Government food security, a plan to support agricultural production, the informality that affects that some citizens are included in the Solidarity Assistance Fund for the Employee (PHASE) and the exclusion of some sectors in the assistance programs social.
Also participating in the webinar were Juan Manuel Sontag, general director of Economic and Social Development of the Ministry of Economy, Planning and Development (Mepyd); Richard Medina, director of the Ministerial Cabinet and financial advisor to the Ministry of Finance and Magdalena Lizardo, executive director of the Pareto Consulting Group and professor of Economy and Business at INTEC. The activity was moderated by Armando Barrios, dean of INTEC's Business and Economy Area.
Poverty and unemployment
The economist Magdalena Lizardo warned that the Dominican population is vulnerable to falling into poverty and extreme poverty in the face of any impact. He explained that by 2019 about 2.1 million people lived in a state of poverty, and approximately 248 thousand people lived in extreme poverty.
The INTEC teacher pointed out that so far it is reported that around 59,225 companies have interrupted the employment relationship, of those 36,704 had entered the PHASE, that is, almost 40% of the companies registered with the Social Security Treasury and that workers with suspended contracts amounted to 655,725.
He explained that the Government has endeavored to ensure that the suspensions do not translate into unemployment, but questioned what will happen after May, as far as the PHASE lasts, and until the return to a certain normality in the economic sphere. I mean
Measures taken by the Government
Richard Medina, director of the Ministerial Cabinet and financial advisor to the Ministry of Finance, stated that the Government has taken containment measures before COVID-19 They focus on reducing the spread of the virus and avoiding a collapse of the health system.
“The measures that have been put in place to mitigate the economic situation that has been generated with the Coronavirus are aimed at both companies and individuals. At the company level we have three main areas: the fiscal, credit and monetary areas. At the level of individuals, the programs Stay at home and the PHASE were launched ”, explained the official. I mean
He pointed out that through the card Eating is First, the transfer to 5,000 pesos, with which they will be impacting 1.5 million homes and FASE enrolled formal employees who were suspended to receive a transfer ranging from 5,000 to 8,500 pesos.
Medina said that the Government has prudently managed the resources of the Budget, despite the approved social assistance programs to help the population. "I understand that what the Government is looking for is to be as prudent and austere as possible, while trying to maximize the number of people who receive some type of support," he said, while clarifying that work is within limits. established in the National Budget. I mean
Likewise, Juan Manuel Sontag, general director of Economic and Social Development of the Ministry of Economy, Planning and Development (Mepyd), maintained that the measures taken by the Government try to ensure that people can keep their jobs, that households have levels minimum income for basic expenses and that companies especially MSMEs have liquidity to pay for basic services and try to ensure that the crisis does not go from economic to financial. I mean

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